Local businesses are struggling to obtain foreign currency from banks to fund the procurement of inputs they require for production, a development that may result in the total rejection of the country’s new currency, the Zimbabwe Gold (ZiG).
ZiG was launched on April 5, 2024, to replace the Zimbabwe dollar but the new currency has struggled to find willing takers with most market players preferring to deal in foreign currency, mostly US dollars.
Currently, ZiG cannot be used to buy fuel, an imported commodity that requires foreign currency to purchase.
As reported by Business Weekly, Confederation of Zimbabwe Retailers president Denford Mutashu this week said that during a meeting to share notes with manufacturers recently, the producers said they were struggling to get from the banks the forex they need to procure inputs. Said Mutashu:
The manufacturers, also, if you listen to their plight, it is realistic. Some manufacturers indicated that they are sitting on more than ZiG130 million, which they do not know what to do with because suppliers of raw materials are also demanding USD.
Someone indicated to me this afternoon that they also communicated with their bankers wishing to purchase foreign currency to import raw materials, but there have not been any favourable responses from the banks.
So I think that this whole matter (ZiG acceptance) rests with the Reserve Bank and the financial services sector.
There has gotta be a way to capacitate banks, lubricate banks, and oil banks so that they have sufficient foreign currency for supporting productive sectors.
According to Business Weekly, a source revealed that despite the government’s claims that those in need of foreign exchange (forex) could obtain it from the interbank market, the actual situation on the ground indicated otherwise. Said the source:
Banks have told businesses in no uncertain terms that they have no forex. There are more buyers than sellers on the willing buyer-will-seller market.
Banks say the market has largely been dependent on export surrenders, but most exporters are holding on to their foreign currency, which explains the prevailing tight US dollar liquidity situation.
Bankers Association of Zimbabwe president Lawrence Nyazema said “RBZ has started selling reasonable amounts to banks against submitted pipelines, (but) customers with ZiG loans are disqualified, according to the rules.”
He, however, noted that there have been some improvements in the supply of forex over the last couple of weeks.
Farai Mutambanengwe, an economist and the Small and Medium Enterprises Association of Zimbabwe chief executive said:
I think there is a lot of confusion in the market. When it was initially pronounced, we were told it (ZiG) was backed, (including with US dollars), but now it turns out that you cannot get US dollars at the bank even if you have ZiG.
Also, those people who were in the foreign exchange queue, for their ZWL have been converted into Treasury Bills. When you then force people to accept ZiG it will not work. Some players are now stuck with the ZiG…
People will not accept ZiG because they do not understand what it is worth.
